Ideas for debate:
The Financing of Investments in Long-term Assets and the Inverse Maturity of Deposits in the Commodity-Money-Commodity Type of Mutual Credit
Samo Kavčič*
*Independent author, Radovjica, Slovenia – Email: samo.kavcic@dobrava.net
Abstract
This paper focuses on the financing of investments in long-term assets in the Commodity-Money-Commodity (komoko) monetary system (KMS). The KMS is a special, currently still theoretical version of mutual credit, first introduced in the 2016 summer issue of the IJCCR journal. In dealing with capital goods financial circulation is indispensable. However, financial circulation is prone to speculation, a practice not at all endorsed by CC (complementary and community currencies) communities. Separation of the real and financial exchange circles introduced in the original KMS paper is a method by which community currencies can dispense with speculation and other forms of potentially harmful financial circulation. Separation of the real and financial exchange circles proposed by the original KMS paper is based on a rigid, rule-based barrier between the real economy – which produces new goods and services on one side, and the financial economy – which deals with the exchange of old durable and capital goods on the other. This separation method may, however, be potentially either too cumbersome for businesses or too easy to evade. An improved method of separation of the exchange circles is proposed which basically eliminates the elements of the rule-based barrier and substitutes it with a new feature called inverse maturity of deposits. To implement inverse maturity of deposits, the KMS evolves from a plain ledger-based currency into a form that resembles accounts payables and accounts receivables. This new form of KMS which tracks the maturity of credits (demand deposits) puts the KMS in stark contrast to the existing fractional reserve banking which tracks the maturity of loans i.e. debits. The paper discloses how the KMS, featuring inverse maturity of deposits, dispenses with excessive financial circulation without impeding the real circulation and at the same time supports the use, exchange and production of capital goods. This renders KMS a currency that can crowd out legal tender.
Keywords
Mutual Credit, Finance and Investment, Velocity of Money, Inverse Maturity, Liquidity
To cite this article: Kavčič, S (2020) ‘The financing of investments in long-term assets and the inverse maturity of deposits in the commodity-money-commodity type of mutual credit’ International Journal of Community Currency Research Volume 24 (Winter 2020) 61-73; http://www.ijccr.net; ISSN 1325-9547; DOI http://dx.doi.org/10.15133/j.ijccr.2020.005
IJCCR 